New firm, same eccentric Bill Gross.
The Janus Capital portfolio manager’s latest monthly investment outlook opened with recollections about his high school basketball career—apparently his “legs looked good in short shorts”—and closed by relating his bond strategies to those used by Bridgewater Associates.
According to Gross, “if there ever was an economic concept that currently is not a layup,” it would be the Federal Reserve’s future monetary policy.
He identified several approaches for maximizing return versus risk amid what he sees as the “lower new neutral” real interest rates influenced by Fed policy.
The strategy most similar to his own, according to Gross: Bridgewater’s.
Firm founder Ray Dalio and co-CIO Bob Prince “cautiously advance the theme that if borrowing costs center around 0% real, then assets can be cautiously levered, being cognizant at the same time of the fat tails inherent in our new world of leverage and extreme monetary policy,” Gross wrote in his April 1 piece.
He went on to describe three other noted investors’ strategies: Jeremy Grantham (co-founder of GMO), Warren Buffett, and Jack Bogle, the founder and retired former CEO of Vanguard.
“Unconstrained portfolios at Janus mimic most closely the strategic philosophy at Bridgewater,” Gross concluded. “Cheap leverage is an alpha-generating strategy as long as short rates stay low and mimic the 0% real new neutral.”
Dalio himself weighed in on the Federal Reserve’s fiscal policy last month in a letter to investors. He cautioned against a repeat of 1937, when the central bank hiked rates as the US economy was recovering from an economic depression. The shock move sent markets plummeting and, many argue, extended the US recession.
“Unconstrained portfolios at Janus mimic most closely the strategic philosophy at Bridgewater.” —Bill Gross
“We don’t know—nor does the Fed know—exactly how much tightening will knock over the apple cart,” Dalio wrote in the letter, also signed by Mark Dinner, a senior investment associate at Bridgewater. “We think it would be best for the Fed to err on the side of being later and more delicate than normal.”
When reached by CIO, Bridgewater did not provide comment on Gross’ comparison.
The Connecticut-based hedge fund—the world’s largest with $169 billion under management—does not offer any products similar to the unconstrained bond mutual fund Gross launched at Janus last year. In the 1990s it did, however, manage traditional fixed income mandates and compete with the likes of Gross’ former firm PIMCO.
Gross concluded his investment outlook by wishing readers luck with their March Madness college basketball office pools. “I myself am not a betting man and cannot watch the Duke games”—his alma mater—“for fear of an early heart attack. I didn’t make the team but my heart’s still with them.”
Bill Gross’ entire March investment outlook is available on Janus’ website.
Related Content: Fade to Black: Bill Gross Ends an Era & Dalio’s Warning to Yellen: Don’t Repeat 1937